Confident Wilding looks to the future
Geoff Wilding, Victoria executive chairman has said Warren Buffett has helped guide his strategy after a record year for the group.
‘In 2006 legendary investor Warren Buffet acquired one of the world's largest flooring manufacturers, Shaw Industries. Why? In two words: cash flow. Well run flooring manufacturers generate significant cash ‐ even when growing ‐ due to attractive supplier terms, quality debtors, long life expectancy of key plant, low technological change and other factors.
‘To confirm this view, Victoria's underlying pre‐tax operating cash flow this year was £43.6m and net free cash flow was £23.7m.’ This is £7.1m than the previous year.
‘As a result, it is the board's expectation that in the medium‐term Victoria will be capable of paying an attractive dividend. However, in the short‐term, we remain firmly of the view that the most wealth will be created for shareholders by deploying the free cash‐flow generated by group businesses towards paying down debt quickly and acquiring other high quality, earnings accretive flooring manufacturers.’
‘Margins have more than doubled over the last four years but more upside remains through improving the efficiency of our logistics operation, procurement, and production rationalisation. Each 1% increase in our EBITDA margin increases net profits more than 12.5%. Although 2017 was a record year, shareholders can be assured we remain just as miserly with expenses and just as focussed on maximising sales ‐ we strive to leave no revenue opportunity on the table for one of our competitors. We are positive about the next 12 months ‐ and beyond.’
Sales in the year to 1 April rose by 29% to £330.4m as underlying operating profit rose by 54% to £33.7m. Pre-tax profits more than doubled to £18.8m.
Debt rose from £61.1m to £89.6m but the debt to earnings ration fell from 1.85 to 1.63. Underlying interest costs rose from £3.7m to £4.25m.
‘There is a huge opportunity for Victoria to expand within the UK and overseas, via both acquisitions and organic growth. However we will not pursue growth for growth's sake alone. 2018 will be another positive year for Victoria as we have widened our market exposure, both geographically and by product range and our recent internal reorganisation will provide further revenue and margin growth. This will all be supported by further acquisitions ‐ for which, shareholders can be confident, we will not overpay,’ said Wilding.